Over half of the private-sector workforce in Illinois—that’s more than 2.5 million people—lacks access to an employment-based retirement savings plan, Woodstock Institute research found.
The situation at the national level is equally grim. A recent report shows that the median household retirement savings is only $3,000, and more than a quarter of current retirees rely on Social Security as their sole source of retirement income. Without policy solutions that increase savings access and make saving easy, many workers will retire into a significantly reduced standard of living or poverty.
A new solution up for consideration in Springfield could change that. With the Illinois Asset Building Group (IABG), including partners Sargent Shriver National Center on Poverty Law and Heartland Alliance, Woodstock Institute is advocating for a state-level program to help Illinois workers save money for retirement. Rep. Barbara Flynn Currie in the Illinois House and Sen. Daniel Biss in the Illinois Senate have introduced legislation (HB4595 and SB2758) that would create a program consistent with our recommendations, the Illinois Secure Choice Savings Program.
The Illinois Secure Choice Savings Program is a simple, safe, and affordable way to help private-sector workers save their money for retirement. Employers automatically enroll workers, unless they opt out, into an individual retirement account (IRA) and automatically deduct contributions from workers’ paychecks. Workers select an investment plan and a contribution level or they can use the default target-date fund and a three-percent contribution. Because the accounts are portable, workers can continue to contribute as they move from job to job. All of the individual accounts are pooled together and professionally managed and invested, ensuring that fees are low and investment performance is competitive. The Illinois Secure Choice Savings Program is convenient for workers and employers alike and holds promise for addressing the retirement insecurity crisis facing Illinois workers.
Advocates in Illinois are not alone. At least a dozen other states have adopted, or are working to adopt, similar policies to help workers save for retirement. At the national level, President Obama has consistently been a strong supporter of automatic enrollment IRA programs and continues to encourage Congress to act. In the meantime, he has directed the Treasury Department to begin a pilot program that will help workers without access to an employment-based retirement plan or workers who want to supplement their existing retirement savings. Treasury will create a new Roth IRA product called a myRA (my Retirement Account) that employers can choose to offer to their workers. Workers who choose to participate will need to make an initial deposit of $25 and additional contributions of at least $5 from each paycheck. These myRA accounts will also be portable and workers can choose to roll them into a 401(k) or private sector retirement savings plan at any time.
While the myRA program is absolutely a step in the right direction, the fact that employers must choose to offer the benefit to workers and workers must opt in, as opposed to being automatically enrolled, means that many workers will still not have access to retirement savings through their workplace.
We are encouraged by the President’s actions and encourage Congress and other states to act as well. The Illinois Secure Choice Savings Program is gaining positive traction with Illinois legislators, community organizations, and business groups. We are eager to increase the list of supporting organizations and businesses, so please consider signing on today. Ensuring that workers and their families have access to easy and safe retirement savings plans means that fewer families will retire into poverty or have to rely solely or primarily on Social Security and other governmental supports. Help us implement the Illinois Secure Choice Savings Program to ensure future financial security for all.